NCLT Bengaluru Declines to Rule on FEMA Issues in Aakash–Byju’s Rights Issue Dispute

April 7, 2026 : The Bengaluru Bench of the National Company Law Tribunal (NCLT) has dismissed an application filed by Aakash Educational Services Limited seeking regulatory clarity on funds infused by Think & Learn Pvt. Ltd. (Byju’s) during its Corporate Insolvency Resolution Process (CIRP), holding that issues relating to foreign exchange compliance fall outside its jurisdiction under the Insolvency and Bankruptcy Code, 2016.

The Bench comprising Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada rejected the plea filed under Section 60(5) of the Code, which sought directions to the Reserve Bank of India (RBI) to examine the legality and regulatory classification of funds remitted as part of a ₹240 crore rights issue.

Aakash had undertaken the rights issue to raise capital and, in the first tranche, received approximately ₹25 crore from Think & Learn Pvt. Ltd., the corporate debtor undergoing CIRP. The funds were raised by the latter through a Debenture Subscription Agreement dated 7 November 2025 with a foreign entity.

Concerns arose when Aakash examined the terms of the debentures and found that certain clauses appeared inconsistent with the requirements of compulsorily convertible debentures (CCDs). It argued that the presence of optional or partial conversion features could result in the instruments being treated as debt rather than equity. This, according to Aakash, could bring the transaction within the External Commercial Borrowings (ECB) framework under the Foreign Exchange Management Act, 1999 (FEMA), which restricts the use of such funds for equity investments.

In light of these concerns, Aakash withheld allotment of shares to Think & Learn and parked the funds in a separate interest-bearing account, pending clarity on regulatory compliance. It then approached the Tribunal seeking, among other reliefs, a determination on the legality of the funds and permission to refund the amount if found impermissible.

Opposing the application, the Resolution Professional argued that the plea was not maintainable as it sought adjudication on FEMA compliance, which falls within the domain of specialised regulatory authorities. It was also submitted that the Committee of Creditors had approved the transaction to preserve the value of the corporate debtor’s shareholding in Aakash, and that the application was an attempt to delay the CIRP.

The RBI, in its submissions, stated that no conclusive opinion could be formed in the absence of complete transaction details, including the nature of instruments and routing of funds.

Examining the scope of its jurisdiction, the Tribunal observed that while Section 60(5) grants residuary powers to adjudicate matters arising out of or in relation to insolvency proceedings, such jurisdiction cannot be extended to issues governed by specialised statutory frameworks like FEMA. It emphasised that determining the classification of financial instruments, assessing regulatory compliance, and examining the permissibility of fund utilisation are matters reserved for competent authorities under the relevant laws.

Relying on the Supreme Court’s rulings in Embassy Property Developments Pvt. Ltd. v. State of Karnataka and Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, the Bench reiterated that the NCLT cannot assume the role of a regulatory authority or adjudicate disputes lacking a direct nexus with the insolvency process.

The Tribunal held that although the transaction had a connection with the CIRP, such nexus alone does not confer jurisdiction to examine independent statutory compliances. It further clarified that it cannot determine the legality or “colour” of funds under FEMA.

Accordingly, the application was dismissed, with liberty granted to Aakash Educational Services Limited to seek appropriate remedies before competent regulatory or statutory authorities.

Case Title: Aakash Educational Services Limited v. Shailendra Ajmera, Resolution Professional of Think & Learn Pvt. Ltd. & Anr.
Case No.: I.A. No. 1111/2025 in C.P. (IB) No. 149/BB/2023
Coram: Sunil Kumar Aggarwal (Judicial Member) and Radhakrishna Sreepada (Technical Member)